The Effect Of Investment On Economic Growth And Investment Efficiency Since The Reform In China

In both Classic Economic Growth Theory and the Modern Economic Growth Theory, capital accumulation is considered an important impetus for economic growth. Investment has much direct and significant pulling effect on economic growth compared with other factors. Investment can affect macroeconomy through two ways: one is the short-run demand effect, which means that since investment is a component of aggregate demand, the increase in investment can pull the growth of the aggregate demand and output level; the second is the long-run supply effect, which means that investment can form new productivity, and thus could provide essential physical and technical foundation for economic growth. So there are no outputs without investments, and macroeconomy cannot keep growth without the increase in investment.According to modern business cycle theory, the fluctuations in investment are the main reason for economic fluctuation. So now the variation of investment is the main index for judging the fluctuation of business cycle, and the investment has already become the primary variable for macro-control.China's economy has made significant progress since reform and opening-up, however, there are still some problems which are needed to be solve. On the one hand, there exist obvious and frequent fluctuations during the period of high-speed growth of China's economy, which means that China's economic growth is characterized as alternant expansions and deflations. On the other hand, the high-speed growth of China's economy is the extensive growth which is driven by the mass input of production factors rather than the intensive growth which is driven by efficiency, and apparently the current economic growth mode of China is non-sustainable. Because there does exist close relationship between the above problems and the fixed-assets investment, it is necessary to study the investment's effects on economic growth and investment efficiency in China.With the deepening of reform of economic system and investment system, although the investment subject and financing channel have been diversified in China, state-owed enterprises still play important roles in China's investment structure, and the investment subject is still government rather than enterprises. The proportion of innovation investment which is as the main form of intensive investment decreases year after year, and it means that the devotion of technical renovation of China's enterprises is insufficient. Moreover, the model of investment in fixed assets indicates that because of the existence of"soft budget"mechanism and interest rates non-liberalization, China's investment in fixed assets is insensitive to the change of interest rate.The investment fluctuations are consistent with economic fluctuations since China's reform and opening-up. The investment fluctuations have led to economic fluctuations, and the economic system and macroeconomic policies are the main reasons for China's investment and economic fluctuations. The result of econometric study indicates that the increasing investment has pulled China's domestic demand strongly, improved the economic supply, so it is the main impetus for China's economic growth. Furthermore, there does exist long-run steady relationship and bidirectional causality between economic growth and investment and consumption in China.China's investment ratio is increasing step by step in recent years, but its consumption ratio is decreasing gradually, that is to say, the current proportion between investment and consumption in China is un-balanceable. Not only the factor of characteristic industrialization process for developing countries, but also the factors of investment -financing system and macroeconomic policies are the main reasons for unbalanceable proportion between investment and consumption in China. The current problem of high investment rate and low consumption rate would have negative effects on China's economic stable growth and employment. So deepening the reform of investment system, adjusting the income distribution structure and speeding up the reform of social security system are key approaches to solve the problem of unbalanceable proportion between investment and consumption.Based on the data of capital stock, the study result of China's capital-output ratio(K/Y), the incremental capital-output ratio(ICOR)and the total factor productivity(TFP) indicate that China's investment efficiency is decreasing in recent years, moreover, both TFP's growth rate and the contribution rate of TFP's growth rate to economic growth are decreasing, too. On the contrary, the contribution rate of production factor's growth rate to economic growth is increasing year by year. It means that China's economic growth is driven by production factors input rather than technology progress in recent years, and China's economic growth is extensive growth rather than intensive growth. So in order to improve China's investment efficiency and realize the intensive economic growth in China, we should perfect the investment and financing system, improve the proportion of innovation investment and increase the input of technology progress.In couclusion, only from the angle which is propitious to adjust economic and industry structure, and from the view of comprehensive, harmonious and sustainable Scientific Development View, can we realize the sustainable growth and sound circulation by transforming the mode of economic growth and improving the efficiency of resource allocation.